BERLIN (Reuters) - Germany said it would abstain in a vote on Thursday at the U.N. General Assembly on changing the Palestinian Authority's diplomatic status, citing fears that it could be counterproductive to the peace process.

"We did not take this decision lightly. Germany shares the goal of a Palestinian state...but the decisive steps towards real statehood can only be the result of negotiations between Israelis and Palestinians," Foreign Minister Guido Westerwelle said in a statement.

The assembly is set to implicitly recognize a sovereign state of Palestine by approving a Palestinian resolution that would change their U.N. observer status from "entity" to "non-member state," like the Vatican.

Israel, the United States and a handful of other members are planning to vote against what they see as a largely symbolic and counterproductive move by the Palestinians. Berlin's decision to abstain rather than to vote against is a blow to Israel, which counts on Germany as a firm ally.

Germany said earlier this week it could not support the resolution, which has the support of more than a dozen European nations, but did not initially make clear if it would vote against or abstain.

"In our view there are doubts over whether the desired move by the Palestinians today is supportive for the peace process. We fear it could lead rather to a hardening of views," Westerwelle said.